Shares in American Express Company (NYSE:AXP) were galvanized higher after the credit card giant handily beat third quarter earnings estimates and boosted its guidance for 2016.
The stock surged 9.03% to $66.78 Thursday on volume of 40.06 million shares, and was the top gainer on the S&P500.
Amex wrong-footed the market, and at least one analyst – Bank of America/Merrill Lynch upgraded their rating from Underperform to Neutral, and boosted their target from $60 to $68.
American Express Company (NYSE:AXP) delivers its biggest earnings beat in seven years
The card issuer reported Q3 EPS of $1.24, which beat by a solid $0.28, and revenue of $7.77 billion, which beat estimates by $50 million but was down 5.1% year on year.
“Strong operating discipline and credit quality helped to keep us ahead of the 2016 financial outlook that we first provided at the beginning of the year,” said Kenneth I. Chenault, chairman and chief executive officer. “While reported revenues were down 5 percent, we saw underlying revenue growth of 5 percent after adjusting for the absence of Costco-related business this quarter – slightly faster than comparable second-quarter levels.
The upbeat results came despite the loss of its Costco business last year.
American Express Company (NYSE:AXP) revises 2016 guidance, affirms 2017
“The year-to-date progress gives us greater confidence to substantially increase our investment spending during the remainder of the year and, at the same time, raise our 2016 earnings guidance,” Chenault said.
Amex now expects adjusted earnings between $5.90 and $6 a share, excluding restructuring charges, up from the previous projected range of $5.40 to $5.70 a share.
Other analysts still skeptical on American Express Company (NYSE:AXP)
Nomura analyst Bill Carcache marked down his price target to $56, citing the increased need for marketing and promotion expenses.
Stifel analyst Christopher Brendler said the quarterly result had little to do with “any real fundamental improvement in the business” and that most of the upside probably emanated from overestimating the financial impact of Costco.
Scott Kessler, of CFRA Research, chopped his rating from Buy to Hold citing price multiples of competitors, as well as “considerable competitive challenges.”
Technically, yesterday’s bounce has, in one stroke, taken the stock past its 20-, 50- and 200-day moving averages, as well as penetrated the $66 line, the latter having been a strong resistance line since the past few months.
Quite evidently, momentum has turned positive.